Informatics For Business Administration

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1 Informatics For Business Administration Chapter 6 Enterprise Resource Planning (ERP) 6.1 Definition 6.2 Solution Types for Enterprise Resource Planning 6.3 SAP ERP: SAP's Core Product SAP ERP Financials SAP ERP Human Capital Management SAP Manufacturing and ERP Operations SAP ERP Corporate Services ERP Market References

2 6.1 Definition ERP an enterprise-wide information system that facilitates the flow of information and coordinates all resources and activities within the business organization; it organizes and integrates operation processes and information flows to optimize the use of resources; ERP manufacturing, financial, accounts receivable and payable, general ledger, purchasing, order entry, invoicing, inventory, shipping, distribution, warehousing, transportation, and human resources; Enterprise Resource Planning (ERP) can be defined as: A system used to integrate the informational processes of a single organization. It is a set of software modules that automates transactions by sharing a common database. It allows real-time access to the processes of a firm and eliminates redundancy.

3 There are several categories of application software: - Back-office; Front-office; ERP; - eapplications. Figure 6.1 The extended company and management of customers and suppliers relationships (Source: Internet Technologies for Business - Business categories and models in Internet, Vasile Avram,

4 6.1 Definition According to results of Aberdeen Group to its 2010 survey regarding the factors that drove Small and Medium Businesses (SMBs) to implement an ERP solution illustrated in the Figure 6.2: Figure 6.2 Driving Factors in Adopting ERP Implementation

5 6.1 Definition The Aberdeen Group found the following quantifiable benefits from best-in-class ERP implementations: 22% reduction in operating costs, 20% reduction in administrative costs, 17% inventory reductions (for manufacturing and distributing), 19% improvements in complete and on-time delivery, 17% improvements in schedule compliance (for manufacturing and distributing). Best-in-class implementations combine strategy, organizational capabilities, and technology to: Standardize and acceleration of both back-office and customerfacing functions, Offer real-time visibility throughout the quote to cash cycle, Use exception reports to respond proactively to head-off potential problems.

6 The advantages of an integrated, best-of-breed approach to ERP include: Ability to leverage substantial investments in existing software and systems Better functionality for specific applications by allowing the use of specialized software Flexibility to participate in collaborative efforts with others, regardless of the ERP system they use. ERP -> Aggressive cost control; analyze costs/revenues on a product or customer basis; flexibility to respond to changing business requirements; more informed management decision making; changes in ways of doing business.

7 ERP solution gives several benefits to the organization such as: A single system to support rather than several small and different systems A single applications architecture with limited interfaces Access to management information unavailable across a mix of applications Access to best practice systems and procedures More integration hence lower costs More automation of tasks Increased flexibility Reduction of lead time Better customer satisfaction Improved performance Improved resource utility

8 ERP solutions: 1 Single-instance 2 Franchising strategy 3 Focus on key processes

9 1. Single-instance - requires a company to jettison fragmented legacy applications to unite under one broad-based system. Smaller companies may find this practical; so large an effort can take time to implement for a big corporation that will feel the ramifications for months, or even years, to come. The complexities of a global operation may completely bar singleinstance ERP as a feasible solution. But where it does work, the advantages are considerable.

10 2. Franchising strategy - maintains a company wide link between common processes. Other ERP functions are conducted independently. This works well for large and varied companies where ERP use on a universal level has limited application.

11 3. Focus on key processes - is often used by companies undergoing growth. For example, a start-up manufacturing company that wants to get ERP running quickly can decide to link a few activities for the time being, while leaving others for future expansion. Starting small also allows more established companies to put some modules into effect, while using these observations to predict the difficulties of a larger effort.

12 SAP ERP is an online transaction processing (OLTP) system that includes at a high level finance, logistics, human resource management, customer service, and quite a few others. Figure 6.3 The SAP evolution

13 Gartner Magic Quadrant for Single-Instance ERP for Product- Centric Midmarket Companies

14 SAP Solutions SAP Solutions SAP S/4HANA SAP Business All-in-One SAP Business ByDesign Brief Description SAP S/4HANA is a next generation business suite built on our advanced in-memory platform, SAP HANA, offering a personalized user experience with SAP Fiori. Deployable in the cloud or on-premise, SAP S/4HANA is built to drive instant value across lines of business and industries. Automate your core processes and manage your fast-growing small or midsize enterprise with these industry-specific ERP solutions. Run your entire business on a single, cloud-based software solution, ideally suited for upper mid-size businesses and subsidiaries of large corporations. SAP Business ByDesign is a complete, integrated suite that can run your whole enterprise financials, human resources, sales, procurement, customer service, and supply chain. SAP Business One SAP Business One is designed to help your small business better manage every aspect of your company from sales and customer relationships to financials and operations. Available on-premise, on-demand, and powered by ourin-memory computing platform (SAP HANA) the choice is yours. SAP ERP SAP ERP (SAP Enterprise Resource Planning) is a proven, trusted foundation built to support companies of all sizes across all industries. Leverage role-based access to critical data, applications, and analytical tools and streamline your processes across procurement, manufacturing, service, sales, finance, and HR. SAP R/3 SAP R/3 is the former name for SAP ERP, our enterprise resource planning software. SAP R/3 was officially launched on 6 July Various releases of the software were made through the 90s. A newer version of the software, with new architecture, was released in , and renamed as SAP ERP. Source:

15 The comparison of SAP ERP with its ancestor SAP R/3 can be defined as more: - Extensible and powerful due to the adoption of open Internet and Web Services standards alongside Microsoft.NET and J2EE interoperability; - Adaptable and agile due to adoption of Services-Oriented Architecture and the leverage of his web-based computing platform.

16 SAP included essential business functions : SAP ERP Financials - Provides built-in compliance for Sarbanes- Oxley and Basel II, which takes financial reporting and corporate governance to another level. SAP ERP Operations - Composed of Procurement and Logistics Execution, Product Development and Manufacturing, and Sales and Service. These solutions take logistics to the next level, introducing sales, warehousing, procurement, transportation, and distribution into the realm of collaborative business solutions. By extending these core business processes to include customers and suppliers, and enabling employees with Portal and even mobile access, ECC is truly at the core of a solution.

17 SAP ERP Human Capital Management (HCM) - Transforms an HR department into an organization well equipped to manage and retain the core of any successful business its people. HCM pushes HR business processes out to the Web, enabling long-time mainstays of HR organizations such as recruiting, e-learning, and employee self-services to change and evolve with much greater velocity and agility than its predecessors. In this, SAP ERP HCM maximizes workforce potential. SAP ERP Corporate Services - Wraps up a set of core services into a neat package. Processes ranging from Project and Portfolio Management to Environment, Health, and Safety (EH&S) Management, Real Estate Management, Travel Management, and Quality Management are unified and streamlined like never before possible. SAP ERP Analytics - A targeted and robust solution, marrying financial, operations, and workforce-based analytics and reporting. Supports the entire lifecycle of support management.

18 ERP Market The table below shows the top vendors for ERP solutions on the major sectors of industry. The number represents the percent market share. Industry Sector ERP Supplier Manufacturing& Distribution Industry Transport, communication, energy, sanitary services Service sector Retail sector SAP Oracle Microsoft Infor Epicor IFS 2 1 Lawson Consona Corp 1 2 Activant 1 QAD Adonix 1 SAGE 1 2 Visibility 1 Netsuite 2 Exact 3 Others Data collected from source:

19 ERP Report 2015 (mid-size)

20 ERP Report 2015 (mid-size)

21 ERP Report 2015 (mid-size)

22 ERP Report 2015 (mid-size)

23 : Seven trends to shape the future of enterprise applications and ERP 1: Cloud deployment models change application economics on-premises applications have reached breaking point (upgrade too costly and customization too difficult) --> solution SaaS, Cloud Computing; 2: Mobile technology accelerates business processes high potential of mobile applications; 3: Business process flexibility evolves via embedded modelling tools BPM 4: Application user experiences advance to the next level graphical features that deliver business intelligence and interactive displays that enable decisionorientated activities and real-time customer interactions; 5: Extensibility improves via platform-as-a-service standard functionality plus PaaS extensibility; 6: Elastic computing platforms scale transactions and analytics Forrester defines an elastic application platform (EAP) as an application platform that automates the elasticity of transactions, services and data, delivering high availability and performance using elastic resources; 7: Collaboration comes to applications in context via social tools effective use of social collaboration in enterprise applications and business processes.

24 References (additional to those indicated in the corresponding Lecture Note) 1. Whitten, J., Bentley, L. (2007). Systems analysis and design methods, 7th edition, McGraw-Hill ERP REPORT, A Panorama Consulting Solutions Research Report, 3. er-seven-trends-to-shape-the-future-of-enterpriseapplications-and-erp

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